Release Date: January 16, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• M&T Bank Corp (MTB, Financial) successfully executed its financial plan for 2024, meeting or exceeding expectations for net interest income (NII), fee income, expenses, and average loans and deposits.
• The bank issued its first sustainability bond and received recognition for its social, environmental, and governance accomplishments.
• M&T Bank Corp (MTB) achieved significant progress in reducing its commercial real estate (CRE) concentration, reaching a target level.
• The bank's capital levels remained strong, with a CET1 ratio of 11.67% at the end of the fourth quarter, and it restarted its share repurchase program.
• Asset quality improved with a $1 billion reduction in commercial criticized loans and a $236 million reduction in non-accrual loans.

Negative Points

• Fourth-quarter diluted earnings per share decreased to $3.86 from $4.02 in the prior quarter, with net income dropping to $681 million from $721 million.
• The net interest margin decreased by 4 basis points to 3.58% due to lower contribution from free funds.
• Non-interest expenses increased by $60 million from the prior quarter, driven by higher salaries, benefits, and costs related to corporate real estate optimization.
• Net charge-offs for the quarter rose to 47 basis points from 35 basis points in the linked quarter, with notable charge-offs in marine dealer and manufacturing C&I loans.
• The allowance to loan ratio decreased slightly, reflecting a reduction in criticized loans, but concerns remain about potential stress in the office sector.

Q & A Highlights

Q: Can you unpack your comments on capital and buybacks? Does the 11% CET1 ratio imply you can do more than $2 billion in buybacks this year? A: We feel comfortable operating at an 11% CET1 ratio. Our plans are to bring our ratios down throughout the year, driven by RWA growth and loan growth. If we hit our plan for 2025, we might do a little over $2 billion in buybacks. If loan growth is less, we'll do more share repurchase; if more, we'll do less.

Q: What is driving the reduction in criticized loans, and what matters most for this trend to continue in 2025? A: The reduction was driven by full payoffs and upgrades, aided by a drop in the yield curve. For 2025, the steeper yield curve might slow down loan curing through permanent placements. The pace of Fed reductions will impact our C&I portfolio, and we expect a more modest reduction in criticized loans compared to 2024.

Q: How do you view the progress in reducing CRE exposure, and what's been the client response? A: We've managed through the last couple of years by doing more placements and some sales, mainly with non-core customers. Our core customer base remains intact, and they know the pipeline is open. We have about $1.5 billion in the CRE pipeline, indicating growing client engagement.

Q: Could you frame the stress in the portfolio if there are no more rate cuts versus two to three more? A: If rates stay where they are, there will be some stress, particularly in office spaces. However, fundamentals are improving in other areas like construction, hotel, and retail. We expect less impact on financials moving forward due to a better quality criticized book.

Q: How do you see the margin outlook if there are no Fed moves and loan growth remains stable? A: We expect our net interest margin to increase throughout 2025. Our receive swap portfolio and fixed-rate repricing assets should contribute positively. We anticipate improvements in non-maturity deposits and time deposits, driven by Fed actions and the shape of the yield curve.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.